Phoenix University, which agreed to the highest value settlement among for-profit organizations, was one of the largest recipients of Post-9/11 GI Bill benefits and it had around half a million students. However, due to the university of Phoenix lawsuit, these numbers fell drastically. It was claimed that the university engaged in misconduct in the enrollment process and utilized false advertising strategies to attract students. Hence, though the institution admitted no wrongdoing, it agreed to a considerable amount of Settlement -$191 million. Yet, this benefit has some conditions, and not all students can get this opportunity. In this guide, we will discuss the lawsuit details, settlement eligibility and other options if a borrower does not qualify for this forgiveness program.
$191 Million Worth Settlement- What Happened?
The most recent news about the university of Phoenix Lawsuit was the settlement worth $191 million. Settlement in university lawsuits is a common event, but this case is unique due to its vast amount and other terms that the responsible institutions agreed.
People usually decide to enroll in educational institutions because they believe a diploma can bring more opportunities in a professional career. That is the main reason why the students agree to undertake unmanageable loans to pay their tuition fees. Hence, universities also promote their businesses by linking their education to excellent outcomes in their careers. The University of Phoenix is one of those institutions that used career benefits as a tool to attract more students. Its marketing campaign called “Let’s Get to Work” showed well-known brands such as Adobe or Microsoft as the employers of their graduates.
Therefore, the lawsuit was brought against the University of Phoenix and its parent company because they allegedly misled the students through these ads. One of the claims included the institution’s false representation that the major corporations played a role in curriculum development. Besides, they tried to manipulate students by showing non-existent relations with the employers and misleading them that these organizations have unique positions for the University of Phoenix students.
False Ads of Phoenix University
It can be useful for potential students to be well-aware of such ads to avoid university scams. For instance, one of the ads that lead to the university of Phoenix lawsuit was called “Parking Lot.” In this marketing communication tool, the institution resembles a struggle for a parking lot to a job search process in terms of how frustrating the process can be. Next, they showed several logos, including Adobe, Avis, AT&T, and many more, claiming that they are working together to create options for the students. Besides, the ad asserted that the university creates a curriculum with potential employers so that a graduate is an excellent fit for their positions. Another TV ad specifically targeted veterans by claiming that the institution is partnering with major companies like AT&T or Allied Barton for hiring them.
Misleading Enrollment Process
Another drive claimed for the university of Phoenix lawsuit was the fraudulent activities of enrollment advisors. The university officials distributed pre-created documents about what these enrollers should talk with the students. In these ‘manuals’, there were points including how this university created a competitive advantage for students. They even included the names of graduates that work in high-profile companies. Besides, the enrollers claimed that the university has 2000 partners locally, which are ready to give preference to Phoenix students in the recruitment process.
Lastly, they again noted that major companies help the university to shape the curriculum. Allegedly, they asked the employers what skills they are looking for in employees and created a curriculum that taps these needs.
What Was Discussed in the Investigation Process?
As we already discussed, the University of Phoenix lawsuit involved many controversial points, including false ads and misleading recruiters. According to the Federal Trade Commission, the companies whose logos were shown in the “Parking Lot” ad did not have any relation with the Phoenix University or its students. The only mutual work was the tuition discount that Phoenix University provided to some employees of these organizations. Besides, the university advertised the names of graduates that worked with big employers to support their claims about special relations. However, this action was false because those people were already working with the companies before studying at Phoenix University.
What about special job opportunities? There was nothing special to the Phoenix students because the vacancies, even for veterans, were available to any other student.
What was the Result of the Settlement?
As a result of all these allegations, the University of Phoenix agreed to a $191 million settlement. Out of this amount, $50 million is in the form of cash payments or refunds to former students. The rest- $141 million- is a loan forgiveness amount. In other words, the officials agreed to eliminate $141 million worth of student loans owed directly to the school. This monetary settlement is one of the highest amounts ever paid by a for-profit school. It should also be mentioned that neither the university nor the parent company accepted wrongdoing.
The forgiveness program of the settlement is available to the students who enrolled between October 2012- December 2016. This period was chosen because the Federal Trade Commission believed that the institution could have misled students enrolled at this time. The settlement also required the institutions to send letters to qualifying students in 15 days to inform them about the benefits. Besides, they had 55 days to contact credit rating agencies to instruct them to cancel the debt from students’ reports.
What about the Students who could not Benefit from the Settlement?
As attractive as $191 million seems it does not benefit all the students of the university. Only the debt owed directly to the university is eligible for forgiveness. Hence, if students have federal or private loans for education at the University of Phoenix, they cannot get rid of it through this settlement. However, there exist some opportunities for students to eliminate their debt.
But Before…
In the following sections, we will discuss the options University of Phoenix students have to get rid of their debts. Yet, before starting the discussions, one needs to keep in mind that it is not easy to cancel student debt. Debt forgiveness programs offer great opportunities, but receiving these benefits can require a lot of time and energy. Besides, choosing the right financial aid program is also complicated because each one has its own limitations and eligibility criteria.
Every year, thousands of borrowers lose their chances of forgiveness due to technical mistakes or lack of documents. Another main reason for failure is unclear eligibility conditions. Therefore, many students apply without satisfying each of the requirements. Hence, if you decide to apply for an aid program, it is better to get third-party help like Student Loans Resolved to guide you through the whole process. Our debt management specialists have years of experience in this field and can even help the borrowers to find the most suitable program to maximize their chances. Let us be by your side in your struggle for a debt-free future.
Borrower’s Defense to Repayment Program
This federal aid program targets students studying in universities that engage in misconduct, misrepresentation, or violets laws. It is an excellent opportunity for students with federal loans as the University of Phoenix lawsuit does not eliminate those debts. Before applying to this program, a student should keep in mind that Borrower’s Defense to Repayment only covers the debts if there is misconduct related to the loan or educational service. Other cases that can involve harassment or personal injuries do not qualify for this program.
One of the greatest benefits of this program is that applicants can even get refunds for their prior payments. However, there exists a time limitation. If the borrowers applied in the applicable period, they can receive a refund. The refund will equal the difference between the loan payments and the discharge amount. The applicants will get the excess if the discharge amount is higher than the paid obligations.
As mentioned before, the main criteria to qualify for the BDRP is proving the misconduct. In the case of Phoenix University, this process can be much easier. The university is already known for the lawsuit due to false advertising and misrepresentation claims. Hence, a student can have a higher chance to convince the Department of Education to get federal assistance.
Application to BDRP
Fast applications can be made through the online platform using FSA ID. However, application through email or mail is also possible. The Department of Education suggests collecting all the necessary documentation before starting the application process.
When applying to this program, there exist several conditions to meet. First, personal information, such as contact details should be provided. Next, education-related details such as enrollment time, degree, and tuition fee should be noted. However, the most important section is the proof for supporting your claims. As mentioned, Borrowers Defense to Repayment program only helps students that were misled by the universities. Hence, an applicant needs to provide documents that will prove the claims. Such documents can include the emails between the student and university officials, brochures with false ads, etc. Besides, the applicant needs to explain what happened, what the officials said, and why he/she thinks that the actions of the institution were unethical or unlawful. Lastly, in the applicant, the borrower may agree that the debt will be put in loan forbearance during the review time.
If the application is successful, the applicant will receive a notification informing the approval of the case. This email will indicate how much of the direct loans will be canceled. After that, within 90-120 days, the loan servicer will cancel the debt.
Forbearance Status
When borrowers choose forbearance or stopped collection status in their applications, they gain a short period of relief from the debt. Forbearance covers the period until the Department of Education reviews the case and comes to a conclusion. During this period, the borrower does not need to make monthly payments. Yet, the interest payment will continue to accumulate. If the application is not successful, the payments will resume, and you will be required to repay all interests. However, applicants have a right to make loan payments if they wish so.
How Much Debt Will be Discharged?
When the Department of Education approves the case for Borrower’s Defense to Repayment, they determine the percentage of discharge. Applicants get this information through their notification emails. The Department of Education decides on a forgiven amount by comparing the income of graduates of the Phoenix University with the graduates of other institutions.
Debt Consolidation
Debt consolidation can be another way of reducing the loan burden if the student is not eligible for the university of Phoenix lawsuit settlement. Consolidation is effective if a student has more than one loan. Both private and federal loan holders can benefit from this strategy.
Federal Consolidation
Students with multiple federal loans can apply to this program to combine all their debts into one loan. As a result, they will make only one payment per month which is both more manageable and mostly, lower than the previous payments.
Before deciding whether to apply or not, borrowers need to consider the pros and cons of the program. On the bright side, the application process is easy and completely free. Consolidating the loans means the borrowers will make one payment per month, and this benefit will simplify the bet management process. Many types of student debt, such as Perkins, PLUS, or supplemental loans, can qualify for consolidation programs. Besides, loan consolidation can decrease the interest payment paid per month because it usually prolongs the payback period for up to thirty years. Additionally, the new interest rate will be fixed, instead of variable. Hence, there will be no need to worry about increasing interest rates.
Yet, consolidation also brings some downsides. As mentioned before, it reduces the interest rate by extending the payback period. Hence, the borrower ends up paying more than what he/she initially owed. Plus, such a long period can be risky as the future is uncertain. Sometimes, consolidation programs can cut access to other benefits such as loan cancellation or interest rate discounts. If the applicants earn credits for Public Service Loan Forgiveness, consolidation will erase all points.
Though it is complicated to decide whether to apply federal consolidation, it definitely benefits people who struggle to make high monthly payments.
Is There a Consolidation Possibility for Private Loans?
Debtors with private loans cannot be eligible for the University of Phoenix lawsuit settlement. However, they can definitely enjoy the benefits of a consolidation program. In the case of private loans, the borrowers cannot apply to federal loan consolidation opportunities, but there exist many private organizations that offer consolidation options.
Bankruptcy
While we in no case advise borrowers to declare bankruptcy, it is also one of the possible options. Bankruptcy can erase all the debt, or create a favorable repayment plan for the borrower. However, it should be the last resort of the debtor for several reasons. First, getting the right to declare bankruptcy is hard. A borrower should convince the judge that he/she has done anything possible to pay back the debt, such as selling the personal properties or looking actively for a job. Hence, even simple daily activities like owning a smartphone or drinking a cup of coffee outside can cost the case. Second, the negative effect of bankruptcy stays in credit reports for as long as ten years. During this time, individuals can face difficulties to rent an apartment, get insurance, or a new loan. Therefore, loan bankruptcy should not be a choice unless there is truly no other way of repaying the debts.
Which Option to Choose?
As mentioned before, deciding on one program is a complicated decision. The application process is time-consuming, and sometimes, getting the benefit of the one program can create barriers for applications to other financial assistance plans. Hence, it is better to get advice from experts in this industry before making any decision. Besides, the University of Phoenix lawsuit showcases the students that they should be more careful while enrolling in a university. They need to take any protective actions to avoid possible scams and debt issues later. For instance, potential students can collect information online from previous students about the quality of education and job replacement rates among the graduates. Merely believing the claims of the institutions can put the students into troubling situations, as we witnessed in this guide.
